How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Masco Corporation (NYSE:MAS) and determine whether hedge funds had an edge regarding this stock.
Is Masco Corporation (NYSE:MAS) a healthy stock for your portfolio? Hedge funds were becoming more confident. The number of bullish hedge fund positions moved up by 6 in recent months. Masco Corporation (NYSE:MAS) was in 40 hedge funds’ portfolios at the end of June. The all time high for this statistics is 51. Our calculations also showed that MAS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are plenty of formulas shareholders put to use to evaluate stocks. Some of the most useful formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best investment managers can trounce the S&P 500 by a very impressive margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to check out the fresh hedge fund action encompassing Masco Corporation (NYSE:MAS).
How are hedge funds trading Masco Corporation (NYSE:MAS)?
Heading into the third quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MAS over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in Masco Corporation (NYSE:MAS), which was worth $149.3 million at the end of the third quarter. On the second spot was GLG Partners which amassed $124.9 million worth of shares. AQR Capital Management, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SAYA Management allocated the biggest weight to Masco Corporation (NYSE:MAS), around 8.01% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, designating 4.02 percent of its 13F equity portfolio to MAS.
Now, some big names were leading the bulls’ herd. Alyeska Investment Group, managed by Anand Parekh, established the most valuable position in Masco Corporation (NYSE:MAS). Alyeska Investment Group had $33.6 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also initiated a $27.3 million position during the quarter. The following funds were also among the new MAS investors: Renaissance Technologies, Ken Grossman and Glen Schneider’s SG Capital Management, and Mark Coe’s Intrinsic Edge Capital.
Let’s check out hedge fund activity in other stocks similar to Masco Corporation (NYSE:MAS). These stocks are The Liberty SiriusXM Group (NASDAQ:LSXMA), Western Digital Corporation (NASDAQ:WDC), MongoDB, Inc. (NASDAQ:MDB), Tradeweb Markets Inc. (NASDAQ:TW), Mid America Apartment Communities Inc (NYSE:MAA), Liberty Global plc (NASDAQ:LBTYA), and International Flavors & Fragrances Inc (NYSE:IFF). This group of stocks’ market values resemble MAS’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $751 million. That figure was $827 million in MAS’s case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Liberty Global plc (NASDAQ:LBTYA) is the least popular one with only 29 bullish hedge fund positions. Masco Corporation (NYSE:MAS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MAS is 61. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on MAS, though not to the same extent, as the stock returned 16.4% since the end of June and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.